Home » Business » Delta results for the second quarter with higher losses | Financial Diary

Delta results for the second quarter with higher losses | Financial Diary

The company reported a pre-tax loss of $ 7 billion between April and June. Regarding the investment in the Chilean company, he said that “it registered a reduction of US $ 1,100 million.”

Delta Airlines reported, this Tuesday, its second largest loss in its history, dragged down by a slower revival of activity in the United States -at the resurgence of cases in the country- and by the beginning of the restructuring processes of two of its Latin American partners in the Bankruptcy Court of New York during the second quarter, Latam Airlines and Aeroméxico.

The largest company in the world -of this industry- reported a pre-tax loss of $ 7 billion between April and June. In adjusted terms, the loss was $ 3.9 billion, not counting the $ 3.2 billion “directly related to the Covid-19 impact and the company’s response, including restructuring charges related to the fleet, amortizations related to certain Delta capital investments and the benefit of the subsidy of the CARES Law recognized in the quarter “The firm’s statement detailed.

In detail, the company recorded $ 2.5 billion in fleet related charges and other charges, after making “the decision to withdraw all MD-90, 777 and 737-700 fleets and parts of their 767-300ER and A320 fleets by the end of 2020.” This is added, he said, to the withdrawal of other aircraft and the cancellation of “its commitment to purchase four Latam A350 aircraft.”

And added that “recorded a reduction of US $ 1,100 million in its investment in Latam Airlines and a reduction of US $ 770 million in its investment in Aeroméxico”, after both partners reported financial losses and decided to file for Chapter 11 Bankruptcy. In December, the airline had paid nearly US $ 1.9 billion for 20% of the Chilean firm.

“As a result of the bankruptcy requests of Grupo Aeroméxico and Latam, we no longer have significant influence over Grupo Aeroméxico or Latam and we have discontinued the accounting for these investments under the equity method in the quarter of June 2020 “, the firm explained in the report.

But this is not the only partner in trouble. British airline Virgin Atlantic, also in the process of agreeing to a $ 1.25 billion bailout, led Delta to cut its investment during the quarter, resulting in a $ 200 million charge.

In his conference call with investors and journalists, the CEO of the company, Ed Bastian, considered that “this result represents the severe impact that the Covid-19 is having on our company and on our industry” and he recognized that it is the product of those various crises that converged in the same period.

He acknowledged that “from the beginning we knew that the recovery would be turbulent and the last few weeks have shown this.” Thus, He anticipated that they expect “total revenues for the following quarter of September to be between 20% and 25% of what we saw last summer (boreal), since we have also seen an impact on demand due to the increase in cases. “

And he said they will maintain the flexibility seen so far and “we will adjust the plans as necessary.”

Delta shares closed down 2.65% on the day.

Slower demand

Delta said the resurgence of new coronavirus cases and related travel restrictions have stalled the budding recovery in US travel demand, prompting it to reduce the number of flights it expected to add to its itinerary next month.

The airline will add no more than 500 flights in August, up from the 1,000 it had planned, and said it does not see much more adding until the end of this year.

“Demand growth has largely stalled,” Chief Executive Ed Bastian said in an interview reviewed by Bloomberg. “The pace of improvement from this point on will depend on consumer confidence in flying … We are more or less stagnant. We are not going backwards.”

The airline reduced operating expenses by 53% by parking some aircraft, retiring others and reducing labor costs, thanks in part to 45,000 workers who took unpaid voluntary licenses.

“To be successful in this scenario, we have built resilience in the company, focused on making a new and stronger Delta. We will need to be smaller in the coming years. Therefore, we will have to accelerate strategies, simplify our fleets, reduce our fixed costs in a way that was not possible in the past. We have already retired more than 100 aircraft this year, “he described.

He added that “a reduction in the workforce will be necessary,” and that as of Monday night, there were already at least 17,000 workers registered for early retirement packages, in addition to thousands accepting voluntary separation; a figure that does not include the pilots, who have another week to decide.

Results in detail

In detail, Delta reported that the adjusted diluted loss per share totaled $ 4.43, worse than the $ 4.16 expected by analysts polled by FactSet.

While, Adjusted total revenues were US $ 1.2 billion, excluding refinery sales, and translate into a 91% drop from the previous year, in the face of a 85% reduction in system capacity.

The company averaged $ 43 million in daily cash for the quarter, although it said that by June the amount had dropped to about $ 27 million daily. In March, the firm reported about $ 100 million.

Despite the setback, Delta still hopes to cut cash burn to zero by the end of the year and return to “profitability, marginally” in the spring. “Not much, but that’s the hope,” said Bastian.

Delta ended the quarter with US $ 15.7 billion in liquidity through government financing, in addition to others. That, the executives said, will be enough to maintain stability for 19 months.

The airline is debating whether to take an additional federal loan of $ 4.7 billion.



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